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Uber faces a new challenger in London with the launch of a rival car-hailing app that promises to undercut the American giant on price as well as paying its drivers more.

Taxify, an Estonian company that has spread across Europe, Africa and the Middle East since it was founded in 2013, will switch on its service in the capital on Tuesday morning.

It represents a direct alternative to Uber in London, and comes as competitors steal market share from the company in other markets.

While a host of smartphone apps operating in London allow users to order licensed black cabs, until now Uber has been the only major player that allows passengers to hail thousands of private hire cars via a smartphone.

Because private hire prices are not fixed, Uber has been able to undercut taxis and attract millions of passengers in the capital.

Taxify offers an almost-identical service but is promising lower fares than Uber, which charges London passengers £1.25 per mile as well as a £2.50 base fare and 15 pence per minute.

The company, backed by Chinese giant Didi Chuxing, is heavily discounting rides at launch and promises they will be 10pc cheaper than Uber in the long term.

It also promises to pay drivers more, by charging 15pc commission instead of the 25pc that Uber does. Uber has had an often-frosty relationship with its drivers, whom the company defines as freelancers instead of workers, and increased its cut of fares in London two years ago.

Taxify’s chief executive Markus Villig said the company had signed up more than 3,000 drivers before the launch. While this is a fraction of the more than 40,000 Uber drivers, the launch throws down a gauntlet to the US company, which has endured a turbulent few months.

Critics of Uber have long maintained the company will find it difficult to make a profit, since equally aggressive competitors could challenge it if it tries to raise prices.

The company has lost billions chasing global expansion but has struggled against competitors in markets such as China and Russia, and has lost market share against Lyft in recent months as a series of scandals has hit the company. The company's business has continued to improve, however, with Uber's revenues climbing 119pc in the last year.

Mr Villig said Taxify was gaining on Uber in several of its other markets, and said the UK has "tremendous potential" for the company.

An Uber spokesman said: "Competition is a good thing as it raises service levels across the board. Millions of Londoners use Uber to get a reliable ride with average waiting times of less than three minutes.

"40,000 licensed drivers also use our app to make money on their own terms and have always been able to work with several operators. We're proud to offer a range of options including fully wheelchair accessible vehicles and UberPool, which lets Londoners share their journey to save money”

Not necessarily, but probably in the long run.
A post on the London forum says that Taxify are subsidising drivers to compensate then for the intro pax rate i.e. Taxify will suck it up (for a while, at least).

Of course drivers will be worse off. Just not yet though. This is Didi Chuxing who have brought into Taxify. I think Didi Chuxing are going to back this right in. Didi killed Uber off in China are responsible for doing likewise in India and are very well funded. It's going to get interesting if Uber has problems with their licence in London. A one month suspension would be all Taxify/Didi Chuxing need to take the market off of Uber.

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Of course drivers will be worse off. Just not yet though. This is Didi Chuxing who have brought into Taxify. I think Didi Chuxing are going to back this right in. Didi killed Uber off in China are responsible for doing likewise in India and are very well funded. It's going to get interesting if Uber has problems with their licence in London. A one month suspension would be all Taxify/Didi Chuxing need to take the market off of Uber.